OCC Watchdog Paves Way for High-Tech Exams

The man who made a name for himself closing the Bank of New England has climbed to the top of the Comptroller's ranks with big plans to revamp the way banks are examined.

Mr. Barton, the chief national bank examiner, also aims to overhaul the way examiners are trained.

"The time is coming when we are going to have to use (technology) a lot more effectively, which may make our examinations considerably different," Mr. Barton said in an interview. "Many of the things we do on-site we may potentially be able to do off-site."

"There's going to be some pain for the examiners, and the institutions, too," Mr. Barton predicted.

More computer power in the hands of supervisors is likely to mean fewer examiners in fewer banks, but also could mean greater reporting requirements for institutions.

For example, the OCC could ask a bank to format all its files in a new way for these high-tech exams. Or it could ask for an analysis of certain loan procedures that would have been impossible to do manually.

The changes are two to four years off, Mr. Barton said, because they will require a huge change in culture at the Office of the Comptroller of the Currency.

"You have an organization that for years has taken a handbook and gone through the process of examining a bank based upon a question-and-answer process," he said. "How are we going to convince everyone" that computers will make exams more efficient and effective?

"Our concern is that the curriculum and the people doing the training are consistent, whether it's being done in Des Moines or Miami Beach," he said.

The OCC consolidated training and technology under the chief examiner when Mr. Barton, 49, assumed the post in May 1994. As chief national bank examiner, Mr. Barton is in charge of designing exams, which means he decides what the agency's 2,900 examiners will emphasize.

People who know Mr. Barton say his 25 years of bank supervision with the OCC, including stints in London, Washington, and Dallas, have been good grooming for his current position.

Sam Golden, the OCC's ombudsman, who has known Mr. Barton for 21 years, said he is one of the hardest-working people at the agency.

"He cut his teeth here in small banks in Texas," Mr. Golden said. "He's someone that has clearly earned his stripes."

Not everyone is a Jimmy Barton fan. Some sources, who refused to be named, claimed he came down too hard when he supervised the nation's largest banks.

But Stephen Steinbrink, senior deputy comptroller for bank supervision at the OCC, defended his longtime colleague.

"Jimmy is a straight shooter, no nonsense," Mr. Steinbrink said. "He calls things the way he sees them."

The industry has undergone a drastic transformation from the days when Mr. Barton was closing banks. But, he said, just because banks are healthy doesn't mean they should be overconfident.

"That's the best way I know of to get yourself into trouble," he said.

There are several areas in banking that Mr. Barton is watching. Recognizing problems before others has helped him advance at the OCC.

"Jimmy does a great job focusing our examiners on the areas of risk in the national banking system," said Comptroller Eugene Ludwig. "He's been instrumental in spotting emerging trouble spots."

Of concern now, Mr. Barton said, is interest rate risk. As rates have risen over the past year or so, he said, it has had an effect on banks' balance sheets. The OCC is addressing this by training examiners to assess interest rate risk.

Mr. Barton is also worried that competition for loans may be preventing banks from receiving adequate returns.

Meanwhile, the OCC is investigating whether terms of credit are getting weaker. Mr. Barton said he has heard this anecdotally but doesn't have real proof.

To find out how much truth is in the rumors, Mr. Barton is monitoring credit terms of large banks through the shared national credit program. That program is the regulators' yearly review of large syndicated loans.

"One of the focuses of this organization for 1995 is credit quality and what's going on with pricing and terms," Mr. Barton said.

Concentrating on potential problems is a long way from what some would call Mr. Barton's heyday as a multinational bank examiner.

In 1988, Mr. Barton closed the 45 banks belonging to First RepublicBank Corp. in one day.

"It's not much fun to close a bank," Mr. Barton said. But he admits, "Those were some real exciting times."

After the trouble in Texas died down in the late '80s, the OCC shifted its most experienced examiners to New England. That's when Mr. Barton started monitoring Bank of New England, the Boston banking giant that sparked questions about the quality of supervision when it failed in 1991.

Mr. Barton was called before the Senate Banking Committee to defend the record of the Comptroller's office.

Banking has been a part of Mr. Barton's life since childhood when his mother was president of a bank in Wink, Tex. "It's really not close to anything but sandhills and snakes," he said of his hometown, which has no stoplights.

Mr. Barton, 49, got his start as a teller, and when examiners urged him to join the OCC, he jumped. Like many examiners who get promoted to policymakers in Washington, Mr. Barton yearns for the action of the field.

"The writing of regulations is not nearly as exciting as going in and analyzing a particular function of an organization and talking to executive management about it," Mr. Barton said.